Japan's economy shrinks faster than estimated as virus compounds recession risk

Analysts largely blamed slower October-December growth on weakness in capital spending - previously considered the lone bright spot in an otherwise weak economy.

Capital spending fell 4.6% from the previous quarter, worse than a preliminary 3.7% estimate and the biggest drop since 2009, in a sign of soft global demand and Sino-U.S. trade war impacting investment appetite.

Private consumption fell 2.8%, in line with the preliminary 2.9% decline, as households withheld spending after the sales tax hike.

The weakness in domestic demand threatens the central bank's argument that robust capital expenditure will offset some of the pain from soft exports.

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The Bank of Japan may take steps next week to ease the financial strain of firms suffering slumping sales due to the virus outbreak, people familiar with the bank's thinking previously told Reuters.

Adding to the pain for the export-reliant economy, the Nikkei stock average fell 5% to below 20,000 and the yen spiked as investors flocked to the safety of the Japanese currency.

A senior finance ministry official told reporters on Monday of "nervous moves" in the currency market and that he would watch movement with a greater sense of urgency.